In January, US wealth manager Tiedemann merged with Europe’s Alvarium under the new brand of AlTi Tiedemann Global. We talk to the firm’s chief impact officer about how to scale impact with integrity.
Jed Emerson started his career working in youth development and homelessness in San Francisco. He went on to work with George Roberts – the ‘R’ of global investment firm KKR – helping his family office in the area of social Impact, and had a stint as a senior fellow with Generation Investment Management’s foundation.
At AlTi Tiedemann Global, he is creating processes for family offices to “manage their capital with integrity helping ensure they create net positive outcomes with their wealth, and that they show up on the major challenge of climate change”.
He does not underestimate the challenge that there is at present for institutions and family offices in the impact space.
“Now that the impact investing industry is a trillion-dollar industry there is a very real risk that we become too self-satisfied.” He adds: “We have a short window on SDG goals. We have really made progress in only three areas and that is just not good enough. When it comes to the climate crisis, we don’t have the 20 or 30 years that we thought we had anymore – the clock is ticking. And when it comes to social inequality, the clock has already run out.”
Broadening out impact investing
Around $4-5bn of AlTi’s assets are in pure impact investment products, but Emerson says his focus is on “ensuring that all assets we manage or advise on have an eye to the impact that they are having”.
Emerson believes it is important for all investors to have a good understanding of history. “We should recognize that a sustainability and impact focus has been there from the very beginning. The very first-joint stock company, the East India Company in the Netherlands, was subject to ethical pressures and lobbying to ensure that it was investing in an ethical manner.”
But this focus is changing now as impact replaces ESG. It is important that investors “change operating systems within the companies they invest in, so that business leaders are properly informed as regards their own business impact. Only then will we end the confusion between intent and impact and ensure that impact actually happens”.
Regulators are helping this, particularly in the European Union. Emerson says he has to have a cheat sheet covering the eight different regulators important globally and their various different frameworks and timetables for change.
On the one hand this is “obviously immensely complex and can at times be frustrating. But on the other hand, I would say that this is exactly where we should be. All means of doing business evolved gradually, and it is only right and proper that we are having these important conversations now about such a major shift in capital markets”.
Family offices distinct role in impact
For Emerson, family offices have a distinct role. This was particularly true in California where Emerson himself observed new technology fortunes seeking to put that money to work. Similar thoughts were happening in Europe and elsewhere, but to begin with they were isolated “block parties of individual communities and themes. What has happened now is that these scattered individual efforts have tumbled together and created the impact investing community which we know today.”
Emerson says impact-minded European family offices historically had a tendency to be most interested in green and social impact bonds particularly thanks to the work done by Sir Ronald Cohen. “Now what we’re seeing in both Europe and the United States is that everybody does everything. Family offices are exploring all the possible investment avenues including public and private markets and venture capital. Family offices now want it all.”
“In this regard, I find myself advising families on just how much we know now in this space, and just how many different managers are doing phenomenal things.”
Of course, families often have their own particular dynamics and “there is a great need for us to get every family member on the same page. There is also a challenge to ensure that future generation family members understand how they are able to use the power of the capital to bring the values that are important to them into the investing sphere.”
But Emerson believes family officers have had a very distinctive role in driving forward new categories of impact investment. “Family offices don’t wait for the regulators to give them permission to become involved in a particular sector in the same way that institutions often have to. They understand that their capital can change the world and that they can energize new concepts of investing in a way that institutional investors may not be able to.”
An example of this would be microfinance which really was “initiated largely by private foundations coming out of family wealth. Once they had started the ball rolling, mainstream investors became involved and realized they could repackage microfinance debt as bonds”.
“Something similar is happening now with gender investing and with supporting emerging fund managers led by people of colour. This is an area where family offices can spot emerging investible opportunities.”
Emerson is an optimist. “I think the future is so bright that you have to wear shades. We’re in a great moment of opportunity.”
He admits it is also a moment of peril as many of the people who have come into impact investing since the financial crisis of 2008/9 have come in with the traditional finance backgrounds which can “now leave them with blind spots. They still have a lot to learn”.
But in terms of the impact opportunities, he believes it is hard to exaggerate their significance. “There are very real exciting returns out there and those who don’t participate will inevitably be exposed in the future. Social change and energy transition are two extraordinary opportunity sets and we have only just begun to see the possibilities.”